Markets to track RBI policy meet and F&O settlement

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Amidst flow of news from Eurozone, the US and corporate results, markets eked out gains to close on an optimistic note during the week ended.

On the BSE the Sensex ended 160 points higher at 18,722 and the Nifty on the NSE with 53 points gain closed at 5,644. The lower food inflation numbers and renewed buying from FIIs on Friday were the positives. A flurry of reforms like CoS approving 51 per cent FDI in multi-brand retailing and approval of RIL-BP FDI deal may enthuse markets.

Tepid results from many corporates clearly reflect the impact of high interest rate regime. Though majority expect RBI to continue its anti-inflationary stance, telltale evidence of slowing growth may prompt RBI for pause in its rate tightening cycle say analysts.

A sharp swings in stock prices of companies that have announced results reflect the heightened speculative activity. With many companies that can “swing” indices declaring results next week, traders would do well to trade lightly.

The important events in the coming week are RBI policy meet on 26th, and F&O settlement on 28th. With all three of the major credit rating agencies warning that they are considering downgrade of US debt, failure to raise the debt ceiling in time would send shockwaves through the underpinnings of the global financial system.

For the week ahead chartists predict trading band of 18,400-19,150 for the Sensex and 5,510-5,740 for the Nifty. Indices may face stiff resistance in crossing 200-DMAs at 19,046 and 5,718.

Futures & Options

Mirroring the lack- lustre activity in cash markets, volumes in the derivative segment were tepid for better part of the week ended.

Option activity indicates Nifty may consolidate above 5,600 level. Buy Nifty 5,700 call option tip Nifty punters. Expect Nifty and banking stocks to be volatile ahead of results of major Nifty components and RBI policy meet.

Mild long build up was seen in select banking stocks. Buy ICICI Bank, Axis Bank, PNB and Allahabad Bank. On the back of clearance of RIL-BP deal and expectations of acceptance of Government riders in Cairn deal by Vedanta group, heightened activity is likely in oil and gas space. Breakout from `840-`900 trading range may see RIL vault to Rs 940 in next few weeks. Range bound activity with upward bias seen in technology counters.

Start accumulation with medium term perspective, advise industry watchers. Ahead of results mild profit booking was seen in FMCG majors HUL and ITC. Avoid fresh buying till recent highs are crossed. Lack of follow up buying in metal stocks may see them trade sideways. Sources tip buying in Tata Steel for short term. After long time realty stocks are showing good resilience. Accumulate on declines DLF, HDIL and Unitech from futures segment; and Anantraj, Sobha and Godrej from cash segment.

Selling in capital goods counters Crompton and Exide has been overdone feel observers. Institutional buying at lower levels may trigger mild relief rally.

Tea stock McLeod Russel may inch upwards on firm international trends in tea prices. Stock futures looking good are Ambuja Cements, Bharti Airtel, Grasim Inds, GAIL, GSPL, IDFC, Idea, IGL, Shree Renuka, Praj Inds, Pantaloon Retail and United Spirits.

Never change your position in the market without a good reason. When you make a trade, let it be for some good reason or according to some definite rule.

Stock scan

Rallis India Limited, a TATA Enterprise is a leading player in the Indian crop protection industry. The company known for its manufacturing capabilities in crop protection chemicals has strengthened its seed business by acquiring majority stake in Metahelix Life Sciences Ltd.

With the commissioning of new facility at Dahej and successful launches of new products the company has reported robust quarterly results. Buy on declines for target price of `250 in medium term.

Deepak Nitrate Ltd is a leading manufacturer of organic, inorganic, fine and specialty chemicals; and world leader in 2,4 and 2,6 Xylidine; and the second largest producer of DASDA.

The company caters to a wide range of industries including colourants, agrochemicals, pharmaceuticals, rubber, specialty and fine chemicals; and also manufactures intermediates for use in industrial explosives, paints, cosmetics, lubricants, fuel additives, water treatment chemicals and photographic chemicals.

The company is setting up new facilities for forward integration and turnover is expected to cross Rs 1000 crore mark in next two years. Buy on declines for long term target of Rs 375.

One interesting small cap stock on the radar of savvy players is Puneet Resins Ltd. The company is manufacturer of specialty rubber and PVC compounds used to make products such as petrol hose, LPG tubes, protective clothing, seals, conveyor belts etc. Punters tip short term target of Rs 75.

C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are strongly recommended to consult their financial advisors before making any financial investments. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.